Market Snapshot
| Dow | 42573.73 | -418.48 | (-0.97%) | | Nasdaq | 19486.78 | -235.25 | (-1.19%) | | SP 500 | 5906.94 | -63.90 | (-1.07%) | | 10-yr Note | +6/32 | 4.55 |
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| | NYSE | Adv 977 | Dec 1775 | Vol 791 mln | | Nasdaq | Adv 1605 | Dec 2786 | Vol 8.4 bln |
Industry Watch
| Strong: -- |
| | Weak: Consumer Discretionary, Materials, Consumer Staples, Information Technology, Communication Services, Industrials |
Moving the Market
-- Profit-taking interest after big gains this year
-- Lack of buying in front of New Year's Day
-- Drop in market rates
-- Technical movement in play today as the S&P 500 traded around its 50-day moving average (5,942), which pivoted from support to resistance in today's session
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Closing Summary
30-Dec-24 16:30 ET
Dow -418.48 at 42573.73, Nasdaq -235.25 at 19486.78, S&P -63.90 at 5906.94
[BRIEFING.COM] The stock market closed with losses, extending a broad retreat that started on Friday. The major indices closed above their session lows due to some technical movement after the S&P 500 dipped below its 50-day moving average (5,942), which initially drew in buy-the-dip interest. The key technical level pivoted from support to resistance, however, and the S&P 500 moved laterally below that level through the afternoon.
The S&P 500 was more than 100 points lower at its intraday close and settled about 64 points lower, showing a 1.1% decline. The Nasdaq Composite traded down as much as 1.9% at its low and closed 1.2% below its prior close.
Turnaround action in NVIDIA (NVDA 137.49, +0.48, +0.4%) also helped the major indices move off session lows. NVDA shares had been down as much as 2.2% at their worst levels of the day.
The overall vibe remained negative through the entire session. Decliners had a 2-to-1 lead over advancers at the NYSE and a 3-to-2 lead at the Nasdaq. All 11 S&P 500 sectors logged declines ranging from 0.1% (energy) to 1.6% (consumer discretionary).
The downside bias was related to profit-taking after a strong year and some hesitation in front of the New Year's holiday closures. Several foreign markets are closed tomorrow (or closing early) for the New Year's holiday. U.S. markets are open for a full day of trading on Tuesday, but will be closed Wednesday.
Treasuries settled with gains, benefitting from safe-haven buying and rebalancing activity as stocks succumbed to selling interest. The 10-yr yield settled seven basis points lower at 4.55% and the 2-yr yield settled eight basis points lower at 4.25%.
- Nasdaq Composite: +29.8% YTD
- S&P 500: +23.8% YTD
- Dow Jones Industrial Average: +13.0% YTD
- S&P Midcap 400: +12.1% YTD
- Russell 2000: +9.9% YTD
Reviewing today's economic data:
- December Chicago PMI 36.9 (Briefing.com consensus 42.7); Prior 40.1
- November Pending Home Sales 2.2% (Briefing.com consensus 0.9%); Prior was revised to 1.8% from 2.0%
Looking ahead, Tuesday's economic lineup features:
- 09:00 ET: October FHFA Housing Price index (prior 0.7%)
- 09:00 ET: October S&P Case-Shiller Home Price index (Briefing.com consensus 4.2%; prior 4.6%)
Treasuries settle with gains in safe-haven trade
30-Dec-24 15:40 ET
Dow -341.11 at 42651.28, Nasdaq -183.65 at 19576.87, S&P -52.90 at 5917.66
[BRIEFING.COM] Stocks continue to move in a lateral flow. The S&P 500 is stuck below its 50-day moving average (5,942).
Treasuries settled with gains, benefitting from safe-haven buying and rebalancing activity as stocks succumbed to selling interest that started on Friday. The 10-yr yield settled seven basis points lower at 4.55% and the 2-yr yield settled eight basis points lower at 4.25%.
Looking ahead, Tuesday's economic lineup features:
- 09:00 ET: October FHFA Housing Price index (prior 0.7%)
- 09:00 ET: October S&P Case-Shiller Home Price index (Briefing.com consensus 4.2%; prior 4.6%)
Market breadth still negative, but margins are slim
30-Dec-24 15:05 ET
Dow -300.70 at 42691.69, Nasdaq -141.96 at 19618.56, S&P -42.91 at 5927.65
[BRIEFING.COM] The major indices have moved mostly sideways through the afternoon trade. The S&P 500 trades about 35 points lower than Friday's close.
Market is negative, but margin have narrowed compared to earlier in the session. Shortly after the open, decliners had a 3-to-1 lead over advancers at both the NYSE and at the Nasdaq. Now, decliners lead advancers by a roughly 3-to-2 margin at the NYSE and at the Nasdaq.
The equal-weight S&P 500 traded as low as 1.8% today, but trades down 0.9% now.
S&P 500 falls, Lamb Weston and Walgreens lag; Ralph Lauren gains
30-Dec-24 14:30 ET
Dow -304.85 at 42687.54, Nasdaq -150.33 at 19610.19, S&P -44.79 at 5925.77
[BRIEFING.COM] The S&P 500 (-0.75%) is down about 45 points.
Briefly, S&P 500 constituents Lamb Weston (LW 64.46, -2.54, -3.79%), ON Semiconductor (ON 63.82, -2.19, -3.32%), and Walgreens Boots Alliance (WBA 9.29, -0.33, -3.43%) are among today's top laggards despite a dearth of corporate news.
Meanwhile, Ralph Lauren (RL 231.35, +1.80, +0.78%) is one of today's best performers even as the SPDR Retail ETF (XRT 79.61, -1.21, -1.50%) slides.
Gold ends lower to begin the week
30-Dec-24 14:00 ET
Dow -232.56 at 42759.83, Nasdaq -115.98 at 19644.54, S&P -34.45 at 5936.11
[BRIEFING.COM] The Nasdaq Composite (-0.59%) is today's worst-performing major average.
Gold futures settled $13.80 lower (-0.5%) to $2,618.10/oz.
Meanwhile, the U.S. Dollar Index is up about +0.1% to $108.06.
NVIDIA advances higher today; robotics to potentially act as next growth lever (NVDA)
NVIDIA (NVDA +1%) is a sliver of light on a relatively dim trading session today, inching higher while most of its peers encounter meaningful selling pressure. Two headlines crossed this morning that are likely contributing to today's relative strength. FT reported that the GPU designer wants to step into the robotics industry, leaning on its established dominance in AI. Meanwhile, The Information stated that ByteDance, the company behind the popular social media platform TikTok, is looking to allocate $7.0 bln to NVDA's chips next year.
ByteDance's appetite for the most advanced AI chips is not overly surprising. As a video social networking site, TikTok can benefit from AI-generated features like filters, editing, and purely AI-generated video. In fact, TikTok already boasts many AI-powered tools, from automatic music suggestions to effects and text-to-speech. Nevertheless, ByteDance spending $7.0 bln on NVDA's chips showcases the AI titan's steady leadership position in the AI space, a characteristic that does not look likely to change in 2025.
NVDA's desire to move more aggressively into robotics also does not come as a shock. However, it might be the company's next major growth lever.
- A comment that stood out during NVDA's Q3 (Oct) earnings call last month was that the industrial AI and robotics industries were accelerating, supported by breakthroughs in AI models understanding the physical world. Meta Platforms (META) demonstrated how AI has shaped its "metaverse" with its Ray-Ban smart glasses, which interact with the physical world, labelling items in real-time; this technology can be applied to robotics.
- Management added that some of the most prominent global industrial manufacturers are adopting NVIDIA Omniverse -- its real-time 3D graphics platform -- to automate workflows. For instance, Foxconn, which manufactures electronics, uses digital twins (virtual models of a physical object) built on NVIDIA Omniverse to increase efficiency at its Blackwell factories. Meanwhile, U.S.-based companies like Amazon (AMZN) have already been leveraging NVIDIA's robotics simulation technology at a few of its warehouses across the U.S.
- NVDA referred to the robotics aspect of AI as physical AI, where the technology understands and interacts with the physical world. The company added that physical AI can predict the immediate future, anticipating the next event in a series.
As its competition gains ground in the AI chip race, such as Advanced Micro (AMD), NVDA is potentially turning to robotics to fuel its next wave of growth. As a result, if Data Center growth begins to slow meaningfully in 2025, especially if tariffs and export restrictions bottleneck China-related revenue, NVDA might be able to make up the shortfall through industrial AI and its Omniverse offering. This will be an interesting area to watch over the coming months.
Take-Two expected to set a new highscore in bookings in FY26 and FY27 as GTA VI hits shelves (TTWO)
As 2025 draws near, excitement over Take Two's (TTWO -1%) long-awaited successor in its Grand Theft Auto franchise is mounting. Today, FT reported that GTA VI is estimated to generate $3.0 bln in revenue next year, translating to over half of the company's FY24 (Mar) sales. The title is expected to be released in 2025, during TTWO's FY26 (Mar). However, highly-anticipated titles, particularly those produced by a prominent video game publisher like TTWO, often encounter delays, potentially pushing release into 2026 or closer to the end of FY26 or the start of FY27.
Still, TTWO assured shareholders in early November during its Q2 (Sep) earnings call that the game would launch in the fall of 2025. This comment helped fuel a breakout in the stock, which was stuck in a sideways pattern throughout much of 2024, outshining several weak points from the quarter, including a wide earnings miss and lowered FY25 guidance.
- Underpinning the enthusiasm over GTA VI is the extraordinary success of GTA V. Estimates place total revenue from the current title at over $8.0 bln since its 2013 release, supporting an eventual push above $10.0 bln. During its first few months on the shelves, the previous GTA title generated over $1.0 bln in revenue for TTWO.
- Meanwhile, despite over 11 years since first hitting stores and traversing a volatile macroeconomic backdrop lately, GTA V continues to support positive yr/yr revenue growth for TTWO. In Q2, video game sales outpaced internal expectations, helped by consistently fresh online content via Grand Theft Auto Online. A 35% yr/yr jump in GTA+ members (a subscription service to receive the latest online content) highlights the sustained demand for the series. Management added that engagement was strong, anticipating this to continue for the remainder of 2024.
- Given this, at $3.0 bln, the sales estimate for GTA VI could be considered somewhat conservative. However, this may be due to an uncertain economic situation domestically and overseas. During 2024, TTWO announced a restructuring plan, trimming its staff by around 5% and cancelling around $200 mln worth of projects in development, underscoring a wobbly economy. Meanwhile, reports projected that November U.S. consumer spending on video game hardware and software will be down 7% yr/yr, a sharp reversal from the 10% improvement in October.
TTWO is heading into one of the most anticipated years of the past decade due to the predicted success of its upcoming GTA title. Coinciding with this release next year are a few other popular franchises, including new Mafia and Borderlands titles, setting TTWO up for record net bookings in FY26 and FY27. The success of GTA VI could also spur significant console sales for Sony (SONY) and Microsoft (MSFT), as the upcoming title is slated for release exclusively on the latest PS5 and Xbox Series X/S. Nevertheless, a deteriorating economic picture could hinder sales trends, while delays would significantly impact TTWO's elevated FY26 and FY27 revenue expectations.
Payoneer has been making a nice move since robust earnings last month (PAYO)
Payoneer Global (PAYO) is not a widely followed name, but its shares have been making a nice move in recent months. This US-based FinTech company provides digital payment services, including online money transfer and it provides customers with working capital if needed. PAYO is focused on a critical and underserved part of the payment ecosystem: SMBs, cross-border trade, B2B transactions and emerging markets.
- The stock jumped in early November following its Q3 report to a new multi-year high. It sent the stock back above $10 for first time since mid-2021. PAYO reported huge Q3 beats for both EPS and revs. Record revenue of $248.3 mln was up 19.4% yr/yr. Growth was driven by accelerating B2B growth, strong marketplace growth, continued adoption of its card product, price increases etc. PAYO is also benefitting from higher interest income, largely due to a 13% increase in customer funds held on its platform.
- In Q3, ICP (Ideal Customer Profile) growth increased for the fourth consecutive quarter, up 11% with strength in APAC, LATAM and China. ICPs are defined as customers with a Payoneer Account that have on average $500+ per month in volume. PAYO is onboarding larger customers, cross-selling products like cards, and optimizing its pricing strategy.
- ARPU, excluding interest income, increased by 20%, marking the fifth straight quarter of accelerating growth. Its B2B business delivered 57% volume growth in Q3, accelerating from 40% growth in Q2. B2B results benefited from an increased focus on larger B2B customers and high potential clients. PAYO is acquiring larger B2B customers at a good pace and is expanding average transaction sizes. B2B represented nearly a quarter of Q3 revenue, excluding interest income.
- In terms of its upcoming Q4 report, PAYO said there has been macro uncertainty, including from the US election as well as broader geopolitical tensions. That could drive some softening in consumer spending in Q4. Also, PAYO will be lapping a pretty strong holiday season in 2023 from an e-commerce perspective. However, interest rates have crept back up in December, which should benefit PAYO's interest income.
Overall, PAYO caught our attention following its robust Q3 report. Management says PAYO has now entered a meaningful second curve of profitable growth, as evidenced by its robust financial performance over the past three quarters. We also see similarities to Remitly Global (RELY), which we have profiled recently and it too recently posted nice upside as well. RELY focuses more on the consumer market while PAYO seems to focus more on SMBs, but both are performing well.
Grid Dynamics up sharply to a new 2-year high after being added to S&P SmallCap 600 (GDYN)
Grid Dynamics (GDYN +10%) is making a strong move following news last night it will join the S&P SmallCap 600 Index on January 2. We think joining the index is a feather in its cap and a sign that the company continues to grow nicely. The company provides technology consulting, assisting companies undergoing business transformations. Given the mounting popularity of AI, GDYN's services have enjoyed accelerating demand.
- Revenue growth has picked up in recent quarters. It flipped from three straight quarters of negative growth yr/yr to +7.4% in Q2 and +12.9% in Q3 to a record $87.4 mln, which was above prior guidance of $84-86 mln. The momentum is expected to continue in Q4 with GDYN expecting revs of $95-97 mln, which computes as +22-24% yr/yr. In fairness, some of this outsized growth is coming from recent acquisitions, JUXT and Mobile Computing. But it is still good growth.
- Similar to the first half of 2024, GDYN said that demand trends improved across its customer base in Q3. Customers are funding key programs and initiatives. At many customers, there is a sense of urgency to complete projects by the end of the year. Numerous initiatives that were held back due to the economic cycles are now being prioritized for completion.
- Taking a look back, GDYN said on the Q1 call that customers were focusing on sharing their outlooks and forecast plans but not aggressively spending. In Q2, customers were more willing to release budgets and implement their plans. GDYN believes the positive demand environment it saw in Q3 was a result of steady improvements over the past couple of quarters, and it expects that to continue into Q4 and beyond.
- GDYN noted that it set a new record for partnership-influenced revenue in Q3. Year-to-date, partnership revenue contribution accounted for 18% of total revenue. Also, its focus on hyperscalers has paid off with three of the largest being in the top five for partnership revenue. GDYN also has substantially expanded its AI portfolio and now has 30+ service offerings targeting Fortune 500 companies across various industries.
- In terms of the recent acquisitions, Grid Dynamics says each company brings a unique set of capabilities. JUXT is known for delivering complex end-to-end services, from design and user experience to deep functionality and ongoing managed services with a focus on banks and financial institutions. Mobile Computing is a leader in digital transformation with a suite of offerings, spanning industries including manufacturing, CPG and financial services.
Overall, investors are clearly pleased to see Grid Dynamics join the S&P SmallCap 600. Index funds will be required to buy GDYN, but the milestone also should raise the company's profile among investors generally. It also shows how much the company has grown in recent quarters with GDYN knocking on the door of reporting its first-ever $100 mln quarter. We think this bodes well for 2025 assuming demand continues to improve.
MillerKnoll earnings last week showed that the office furniture space needs time to recover (MLKN)
MillerKnoll (MLKN) has been weak since reporting Q2 (Nov) earnings last week. This report, along with weak results from peer Steelcase (SCS), have dampened our hopes of a near term recovery in the office furniture space. There has been a push by employers to get workers back into the office, but these reports signal that the near term outlook appears cloudy.
- MillerKnoll reported upside results for Q2. Revenue rose just 2.2% yr/yr to $970.4 mln, but that was better than expected. The main problem was pretty large downside adjusted EPS guidance for Q3 (Feb) although the revenue outlook was in-line. MLKN also lowered FY25 adjusted EPS guidance to $2.11-2.17. While orders are trending nicely ahead of last year, MLKN said they have recovered at a slower pace than expected at this point in the year.
- On the positive side, new product launches are performing above expectations and MLKN is seeing a very positive response to its promotions. Its Americas Contract segment continues to be a key growth driver with Q2 sales up 6.2% yr/yr organically to $504 mln. While new AC segment orders of $457 mln were lower than expected, they were up 4.9% on an organic basis. Order growth trends improved as the quarter progressed.
- Within the International and Specialty segment, sales grew 2.1% to $246 mln. MLKN continues to see strong order growth in the Middle East and parts of Asia. MLKN is seeing excitement build for its brands internationally. It recently opened its MillerKnoll flagship in London and it opened a new fulfillment center in Belgium. Turning to its Retail segment, sales declined 5.3% and -4% on an organic basis to $220 mln.
- MLKN also said it's paying very close attention to tariff proposals. It noted that it has managed through similar tariff policy changes in the past and is looking to mitigate if needed. This could include identifying alternative sources of supply, options for advanced purchasing and possible future price adjustments. On the other hand, the possible extension of the 2017 tax cuts could have a positive impact and in particular the reinstatement of bonus depreciation.
Q2 marked the second consecutive quarter where the stock has gapped lower on earnings. MillerKnoll concedes that macroeconomic improvement is progressing more slowly than expected, however, it is encouraged by many trends and is building momentum for 2HFY25. With that said, rates have been creeping back up in recent weeks, that could be a headwind heading into calendar 2025. It is likely just a matter of time before this industry turns around but it will take some time.
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